EUR/USD’s Range Depending On Greek Resolution
How stable is the EUR/USD Range?
Trading Tip – The Greek issue will be a driving force for the EUR/USD until a solution is developed. Greek Prime minister Papandreou called the E.U.’s bluff last week by threatening to go to the IMF. Germany the region’s largest economy appears reluctant to provide aid and has encouraged the troubled nation to do so. German Chancellor Angela Merkel even went so far as to say that she thinks Greece isn’t in need of financial assistance. Conversely, Eurogroup Chairman Jean-Claude Juncker said on Monday that "Greece will not be abandoned if we see that Greece needs euro zone assistance. We will not abandon Greece." Concerns over future growth were reignited by India’s surprise rate hike, as demand from emerging markets has fueled the global recovery. A pull back in risk appetite continues to hold a high negative correlation with the pair and could be a weighing factor. However, we saw stocks today shrug off longer-term prospects as traders focused on the implication for the passing of the U.S. health reform bill. If risk appetite continues or a resolution to Greece’s issues come s about then we would have the catalyst for our set-up. Despite the staunch support below downside risks remain as the linger-term trend remains bearish.
Event Risk for Europe and U.S.
Europe – The lingering Greek issues may overshadow any fundamental releases with German IFO and the PMI surveys with the most market moving potential. The gauge for German business is forecasted to improve slightly to 95.8 from 95.2 on current conditions with the future outlook remaining unchanged. Expansion in the European manufacturing and service sectors is expected to have slowed to 53.5 from 53.7 led by weaker manufacturing. German officials have expressed concern that their growth has been too dependent on demand from abroad and signs of weakness could dim the outlook for the region.
U.S.– The existing home sales are expected to have fallen for a third straight month in February which could spark a flight to safety and dollar support. A rebound in the housing sector is seen as the key to a recovery and a negative trend will lower the outlook for growth. Conversely, U.S. Durable Goods orders are forecasted to improve for a third straight month as continued demand from abroad and an improvement in domestic consumption are pacing growth. The final GDP figures for the fourth quarter should confirm the economy grew 5.9%, and if the prior releases suggest that growth is sustainable-then we could start to see dollar support on an improved outlook for interest rates.
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